For those in cash, there are stocks that are starting to look good value again I reckon. Could be some good buying opportunities soon.
From The Age:
KFC: Playing chicken on the mining boom
BARRY FITZGERALD
May 5, 2010 - 9:36AM
It's been a case of small and warm beers for Kevin Rudd in his meetings with mining executives in Perth after kicking them in the guts with the tax grab known as the resource super tax profits (RSTP).
In Perth mining circles, the RSTP is being called the GFC Mark II, or Garimpeiro's personal favourite, the KFC – the Kevin Rudd financial crisis.
The industry is making it loud and clear that there is nothing super about the tax grab, pointing to the share price damage caused since the proposal was unveiled on Sunday. The share price retreat has hit the superannuation accounts of every work'n Australian.
The mining executives are also threatening all sorts of doom around future investment plans, job losses and a mass exodus to warmer investment climes. No wonder, given the KFC will make Australia's mining industry the highest taxed in the world (55 per cent of earnings).
Add the gloom in the mining sector caused by the KFC to the broad retreat in commodity prices caused by China's efforts to slow overheating sectors of its economy and fears that there will be repeats of the Greek debt woes elsewhere in Europe, and you can see why there has been a mighty sell-off in the past couple of days.
Today will be another shocker. Copper has fallen to a seven-week low, oil slumped $US3 a barrel and aluminium has given up any hope of holding above $US1 a pound in overnight markets. Even gold let the side down, with June Comex gold off some $US14 an ounce.
Local miners are just going to have to wear the commodity-price falls. But there is good reason to believe that the sell-off in shares triggered by the KFC is overdone. Why is that so? Because the KFC is not going to proceed as currently planned.
It is a theme picked up by ANZ's head of commodity research Mark Pervan.
Pervan said there was no surprise that the mining industry's response to the proposed tax has been very negative, flagging concerns such as reduced domestic project opportunities, a move offshore, lower foreign investment in the sector and reduced merger and acquisition activity.
But he reckons that after the three-week consultation period between industry and Treasury boffins on the proposed tax, the existing tax proposal "will be watered down and concessions made to appease some of these concerns".
Garimpeiro reckons there is no doubt about that. Apart from anything less, legislation for the KFC is not anticipated before 2012, making the whole thing subject to Labor getting back in to power. Polls earlier this week showed there was no guarantee of that happening.
It is against that background that some brave types out there are using the cover of the KFC dark cloud over the mining sector to snap up miners and explorers at what they reckon could prove to be bargain prices.
They will be encouraged on that score by Pervan's comment on the big picture outlook : "This is not the end game. Australia will remain a primary beneficiary of a China-led commodity boom over the coming decade. And other governments, such as India and China, are reviewing their own resource tax structures, suggesting the comparative change may end up being less than initially thought."